Westinghouse chairman quits on heels of losses Resignation follows shareholder outcry

January 28, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer Bloomberg Business News contributed to this article.

Disgruntled shareholders who have been demanding the resignation of Westinghouse Electric Corp.'s top executive got their wish yesterday as Paul E. Lego announced that he had resigned.

Mr. Lego's resignation as chairman and chief executive, as well as from his position on the board, was effective immediately. He said he would continue to serve the company as a consultant.

With his resignation, Mr. Lego became the latest in a series of top executives at major corporations to be caught up in management upheavals brought on by their companies' poor performances.

On Tuesday, International Business Machines Corp., the No. 1 computer maker, said John Akers would be replaced as its chief executive. Earlier casualties include General Motors Corp.'s chairman, Robert Stempel, and Digital Equipment Corp.'s Kenneth Olson.

The management change atop the industrial conglomerate Westinghouse followed billions of dollars in losses over the past two years. Westinghouse's stock, one of the better performers on Wall Street in the 1980s, has suffered in the past year or so, falling as low as $9.375 last year, from $31 a share in 1991. The stock closed yesterday at $14, up 25 cents.

Westinghouse's financial troubles, brought on partly by cuts in Pentagon spending, have led to the elimination of about 4,000 jobs at its Electronic Systems Group unit in Linthicum over the past two years.

During their meeting yesterday, directors of the Pittsburgh-based company also declared a quarterly dividend of 10 cents a share, down from 18 cents. The board announced in November that it would slash the payout to shareholders as part of a broad restructuring intended to return the company to solid financial condition.

Westinghouse has been pounded in the past two years by a disastrous performance at Westinghouse Financial Services, which created a financial drain that cost the company more than $5 billion.

Mr. Lego, in announcing his resignation at a news conference at corporate headquarters, said he had not been asked by the board to step down. When asked whether directors had requested that he stay on, he replied, "No, they didn't."

Richard M. Morrow, an outside director tapped to take over some of Mr. Lego's responsibilities, said, "We did not try to talk him out of it."

Mr. Morrow, retired chairman and chief executive of Amoco Corp., was elected nonexecutive chairman of the board, a post that does not entail making day-to-day decisions on the company's operations.

Instead, Gary M. Clark, 57, president of special operations, was tapped for that job. Mr. Clark was named president and acting chief executive officer, as well as a director.

The search for a new chief executive has already begun, the company said. In a break with tradition, the board said it would consider an outsider for the job. Mark W. Cresap was the last Westinghouse chief executive picked from outside the company, 1959. The next-most-recent such appointment was in 1929, when the board named Andrew W. Robertson, a banker.

Mr. Lego, 62, joined Westinghouse in 1956 as an engineer and spent his entire career at the company. He held division management jobs in the 1970s and became senior executive vice president for corporate resources in 1985. In 1988, he became president and chief operating officer and was appointed chairman and chief executive in July 1990.

Mr. Lego insisted that his departure was not related to shareholder pressure, the company's $1.3 billion loss for 1992 or the recent collapse in talks to sell its money-losing financial services unit to General Electric Co.

He said he started thinking about retirement at the end of last year and decided that, with the restructuring team in place, it was a "good time" to move on.

"I think I'm going out on a high note," he said, looking back on a financial retooling of the company, which included the creation of a $6 billion line of credit.

Other parts of the restructuring plan call for the sale of the company's Knoll Furniture division, Westinghouse Electric Supply Co., its distribution and control unit, and its real estate development arm.

Westinghouse officials declined to comment on rumors that it has held talks with Loral Corp. over the possible purchase of the Westinghouse Electronic Systems Group, based in Linthicum.

Mr. Lego has had a stormy relationship with shareholders, some of whom have asserted that he has refused to accept responsibility for the company's problems.

At last year's shareholders meeting, one of many irate investors present asked when the board was going to recruit "world-class executives" to run Westinghouse. Another called on Mr. Lego to accept a $1 annual salary, based on his "very poor performance."

Asked yesterday about the role he had played in the company's problems, Mr. Lego said: "No benefit would come from those kinds of discussions."

He said, however, that he was fully responsible for the restructuring plan announced in November.

"Some of the major shareholder groups were exerting pressure" for Mr. Lego to step down, said Albert Turner, a Duff & Phelps analyst. "We've known [that for] a while."

For example, the $71 billion California Public Employees' Retirement System, the nation's biggest public pension fund, said last week that it had targeted Westinghouse as one of its "long-term underperformers."

Pension fund officials said Westinghouse was one of seven companies to agree to consider reforms that might increase power of outside directors.

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